Housing prices continued to grow in January, reaching higher levels year-over-year than expected by economists, according to the S&P/Case-Shiller U.S. National Home Price Index released Tuesday morning.

“Home prices continue to climb at more than twice the rate of inflation,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The low inventory of homes for sale -- currently about a five month supply – means that would-be sellers seeking to trade-up are having a hard time finding a new, larger home. The recovery of the sale and construction of new homes has lagged the gains seen in existing home sales.

The national index, covering all nine census divisions, posted a 5.4% gain compared to January 2015, while the 20-City Composite and 10-City Composite posted 5.1% and 5.7% increases year-over-year, respectively. Not seasonally adjusted, all three portions of the index dipped marginally from December levels, and 11 of 20 cities reported increases. After seasonal adjustment, the National and 10-City Composite indices rose 0.5% and 0.8% month-over-month, and all 20 cities posted strong gains.

Price gains were most prevalent in the western part of the country in 2015--Portland, Seattle, and San Francisco lead the way in the 20-City Composite, posting another month of double-digit price growth year-over-year in January.

Year-over-year, the value of existing single-family homes in these cities from the 20-City Composite posted the largest gains:

The index is based on single-family dwellings with two or more sales transactions, and excludes new construction. However, January's year-over-year growth in the total value of existing single-family housing stock is a promising sign for home builders in the coming months, as rising homes values encourage new construction, and existing home inventory continues to throttle potential buyers. An ongoing challenge for builders will be how to supply the first-time and low-income buyers pushed out of the existing home market with affordable product at a good margin.

Read the full release from S&P Dow Jones Indices here >>